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Hospitals beware. Your customers may soon be comparison shopping, if they aren't already.
Hospital prices vary, sometimes widely, and some employers have started to test ways to drive patients toward quality hospitals that charge less than their competitors.
In California, Oregon and Texas, the push to encourage consumers to shop for value has underscored some stark price differences and employers' increasing unwillingness to pay more with no discernible benefit, researchers report in the latest issue of Health Affairs.
Indeed, the California Public Employees Retirement System and grocery chain Safeway have left the choice—and the cost—of selecting a pricey hospital or doctor to households.
The cost can be considerable, reports James Robinson, a professor of health economics at the University of California at Berkeley, and Kimberly MacPherson, the university's health policy and management program director.
For example: CalPERS set a reference price limit of $30,000 on knee and hip replacement surgery. A reference price limit, Robinson and MacPherson explain, is the amount an employer will pay toward the total price of a service, also known as a defined contribution.
Working with Anthem Blue Cross to review quality performance, the initiative identified 47 hospitals with acceptable quality and prices (or less than $30,000).
Two-thirds of hospitals reviewed charged more than $30,000.
And patients have a hefty incentive to choose the 47 lower-cost, quality hospitals. Inside the network, patients pay up to $3,000. But patients who choose pricy hospitals could pay dearly, the authors wrote:
“Enrollees who chose a hospital not on the list of value-based purchasing centers would be responsible for 10% of the allowed charge up to $30,000, plus the full difference between the actual allowed charge and the $30,000 reference price limit. For example, an enrollee who chose a hospital that charged $50,000 would pay $23,000 out of pocket.”
That's a heart-stopping amount for most households in any economy, let alone one struggling through a fitful recovery from the worst downturn since the Great Depression.
Robinson and MacPherson note that the price-sensitive insurance benefits are not widely used and that CalPERS and Safeway have limited the policy to certain services.
But here's one final thought: CalPERS and Safeway have moved to expand their use of reference pricing. CalPERS will use the model for ambulatory surgeries. Safeway started with imaging services and expanded to laboratory tests.
You can follow Melanie Evans on Twitter: @MHmevans.